I was reading Ezra Klein's post about how the "Cadillac Tax", a, tax of "40 percent on each premium dollar over $10,200 for individual plans and $27,500 for family plans," is going to piss off a lot of union members.
Then I wondered, is this threshold indexed for inflation?
It turns out that it is indexed to the Consumer Price Index. (CPI)
Here is the money quote from the article:
We estimate that about 16% of plans will incur the tax upon implementation in 2018, while about 75% of plans will incur the tax a decade later due to the indexing of the tax thresholds with the Consumer Price Index. If the Cadillac tax is ultimately implemented as written, we find that it will likely reduce private health care benefits by .7% in 2018 and 3.1% in 2029, and will likely raise about $931 billion in revenue over the ensuing 10-year budget window from 2020 to 2029.
That got me thinking about the fact that healthcare costs outstrip inflation, and if the "Chained CPI" is implemented, the differential grows...with compound interest.
It appears to me, that the study considered the current CPI formula, and not the which means that they are assuming that reported inflation would be higher by about ½% a year.
Well, if we start in 2010, when the PPACA passed and assign it 100, and we assume 2% CPI, this means that the CPI in 2019 is about 146, but only 139 under the chained number, and this differential grows ever larger as the years go on.
Chained CPI makes this problem even worse.
Yet another reason why the chained CPI sucks like 1000 Hoovers all going at once.